11 Jan 2010

Farming politicians instead of crops

A lot of people are interested in the fish vs farms debate. Here's some more grist for your mills:

This 1996 report [pdf] on California salmon finds that California "Department of Fish and Game policies instead have the State presiding over a succession of extinctions over our wild salmon runs." Who wrote it? The Natural Resources Committee of California's Senate.

Unfortunately, nobody seems to have read that report, and the people who are benefiting from the water diversions that are killing those salmon (in the rivers) and smelt (in the Delta) are good at maintaining that status quo.

This comment on Senator DiFi and her donor/constituent Resnick (recently famous for telling DiFi to tell the National Academies to study, again, the impact of water exports -- to Resnick's farms and others -- on the Delta Smelt) got my attention:

How might Resnick have earned such willing service from California's senior senator? Might have something to do with the thousands in campaign donations and parties in Beverly Hills and Aspen he's thrown for Feinstein and friends like Arianna Huffington.

[snip... to the sign-off, which I love]

Jackson West imagines Resnick and Feinstein are sleepless with concern for the plight of unemployed migrant laborers and Hollywood starlets who might wither away, malnourished, without anti-oxidant rich bottled juices.

Of course this is a delaying tactic, but we can't say that those don't work.

But what about the argument that Ag is important to California and/or more important than fisheries?

Well, DH has this interesting tidbit:

How big is Ag in the California economy? Although the man on the street may say 60%, informed people (like you) say 5%, but I think that even that number is high.

Look at the 2007 figures from the BEA website. My big gripe becomes clear when you look at the breakdown. Notice that “Forestry, fishing, and related activities” are included in the “Ag” total. Pretty offensive to a salmon fisherman. So, if you divide the state GDP of 1,801,762 (millions) by the AG figure of 22,388, the AG percent is approx. 1%.

So that's $22 billion, right? Not bad, even if it's only one percent of the State's economy.

But now LC has to come along and demolish even that number, using our favorite irrigation district, the largest in the State:

Now Westlands claims $1 billion annually in gross farm income during a normal (whatever that means) year. That means Westlands' contribution to the nation's food supply (and exports) is about a quarter of a percent.

According to this USDA website, Net farm income is forecast to be $57 billion in 2009, down $30 billion (34.5 percent) from 2008. The 2009 forecast is $6.5 billion below the average of $63.6 billion in net farm income earned in the previous 10 years. Still, the $57 billion forecast for 2009 remains the eighth largest amount of income earned in U.S. farming.

Therefore the US gross in 2008 was $375 billion and the net was $57 billion. In other words, the net is about one-sixth of the gross. That means Westlands actually is netting about one-sixth of its claimed $1 billion in farm revenues, or about $150 million a year. Take away the water, power, crop subsidies and you drop that true net increase quite a bit further. EWG estimated Westlands' annual subsidies in 2002 at $110 million a year. That means the true net of the Westlands, when you take away all the government giveaways may be only $30-40 million. Now, if you subtract the anticipated costs of drainage and make Westlands pay for their own waste disposal, they may actually not be generating any true wealth out there at all, except what the government gives them.

Aggies appear to be spending a lot of money on maintaining their subsidies, but those subsidies may be all the money they have to spend. In my paper on "options" for the Delta, I thought that Ag would have no trouble coming up with money to pay for a Peripheral Canal, and I thought that enviros would have a hard time paying ag to not take water. Given Ag's low profits, I may have been wrong, twice.

Bottom Line: People who fight political battles often cannot win economic battles. Let's see the aggies (and the fishermen and the enviros) put their money where their mouths are. Any other method of "negotiating a settlement" is just an invitation for corruption and destruction of social welfare.

10 comments:

David, re: Carter's economic analysis. See this response by "Jeff," (his blogging moniker, I guess) a UofP Eberhardt economist. It pretty much dismantles both the Carter/Bacher and Wade numbers, and is what I call fair and balanced.

Jeff's particularly concise in his demolition of the "food+water=national security" trope so popular among flag-waving SJV Repubs and Dems alike.

As you no doubt know, Jeff is one the economists who did the analysis on the effects of water supply restrictions and SJV unemployment. Hopefully, Carter (I've given up on Bacher) will adjust his thoughts so he can be welcomed back to reality.

Violinists, cops, poets and dentists will all tell you that their profession is essential to the future of civilization, and that anything that diminishes it will spell doom. Farmers are no different. We all exaggerate our own importance; it makes life tolerable. I will leave it to the economists to argue over how to measure the relative size and value of different industries. A useful formula is to take the number of economists (N) and apply a function (F) such that N raised to the power of (F-1) will yield an approximate number of valid answers.I think a more important metric is to look at the agricultural products grown in California, and then to compare the amounts of land, labor, water, capital and other inputs it would take to grow crops of comparable quality elsewhere. Add in a factor for California's generally high labor protection standards and environmental laws, and it makes a pretty compelling case that agriculture is not some minor activity, to be dismissed as mere dandruff to be bushed off the capes of environmental crusaders.

Why is a 21,000 jobs lost number for farmworkers because of reduced water deliveries so difficult to accept? I realize that it is much higher than Jeff's guesstimate of 6,000. Yet, when a three-member research group of UC Davis professors provide the higher number and, at the same time, surface holes in his research methods, well…it makes it hard to accept his findings and comments as valid. Anyone interested in how University of California agriculture economists conduct a study on farm unemployment can get a glimpse at:

It’s amazing that educated people continue to try to discredit agriculture by saying it represents about two percent of California’s GDP. That’s the figure attributed to agriculture by the Legislative Analyst’s Office, so for all practical purposes, let’s go with it. http://www.lao.ca.gov/2006/cal_facts/2006_calfacts_econ.htm

Despite its appearance of being small, agricultural production is among California’s top ten of economic contributors and employers. In 2007 it represented $36.6 billion.

At this point the argument often shifts to how much water it takes to fuel that agricultural production. Forget the 80 percent/41 percent thing. The Department of Water Resources estimates that applied water in agriculture is about 32 million acre-feet, which is split in a normal year at 70 percent surface/30 percent ground water. California Water Plan, Volume 1, Chapter 3 - http://www.waterplan.water.ca.gov/previous/cwpu2005/index.cfm

It takes water to grow food and none of the farmers I know are hoarding food. They sell it to consumers who are eating it. I have fairly often read with amusement that the computer industry generates $XXXX dollars per acre-foot of water inputs while agriculture only generates $XX per acre-foot of water inputs. On its surface that is a silly argument. Providing more water to the computer industry isn’t going to lead to more computers and more economic activity. The market drives computer sales and more water allocated to computer manufacturing only means a SLIGHTLY lower manufacturing cost. Don’t expect to see that savings in the cost of your next laptop.

Think farm water prices are too low? Consider this: Most irrigation districts built their systems decades ago and most are paid for. That means the cost to operate them, ie. get the water from its source to that field of tomatoes, is very low. Remember, water in California is free. The State assigns rights to use water in a way that is beneficial to the public and agricultural production is one of those. The actual cost of water is associated with the cost to move, store, treat, pressurize and deliver it. That’s why an acre-foot of water in Orange County costs a lot more than one in the Sacramento Valley.

What does agriculture do with that water? If you’re not growing the food you and your family consumes then it means that someone else is growing it for you. And because California farms produce more than 400 commodities, most likely being grown relatively close to home, less transportation means a smaller “footprint” on the environment.

So when you sit down to lunch today or at dinner tonight with your family, consider how California farmers were able to deliver a healthy and affordable meal, and that you can enjoy it with the rest of the 84 percent of the population that have confidence that their food supply is safe. http://www.cbsnews.com/blogs/2010/01/08/politics/politicalhotsheet/entry6073204.shtml

From where I stand, here in much more fertile, and also Californian, farmland, is that water is not free. We are paying for water in social costs here on the Delta, in environmental costs, in energy costs.

I do agree that 2% of California's economy is still huge.

I sat down to dinner today, a great quiche from local farmers and my ducks' eggs. Yes, they are California farmers; specifically, they are Delta and Northern California farmers. I trust their health not because of the Central Valley's horrible ag. practices, nor because some people honestly believe that water is free, but because we have some really good, consistent food laws, and also because I know most of the farmers who provided me the food.

Josh, you missed my point. The cost of water is the cost of getting it from its source to the end user. Those costs also include the environmental costs in the form of restoration charges, such as those CVP water users pay, water rights fees and energy costs, as you aptly point out. Many water users pay these costs as part of their water charges.

Wade, many don't pay, too. That, or the price isn't adequately representing the cost, and so these are borne socially, such as in the plight of the Delta smelt.

Also, your argument for less transportation of California ag. products doesn't bear out. The ag. market is very convoluted when it comes to importing and exporting, and we often export the same amount and types of produce that we import.

Mike, given the complexity of what they are trying to measure, I suspect that there are plenty of holes in everyone's research methods. I have read no dismantling of the U of Pacific data, but would be glad to review it if you forward it to me, in a form similar to that the UofP folks have made available for non-economist public consumption.

As Mr. Kurtz wrote, "I will leave it to the economists to argue over how to measure the relative size and value of different industries."

Clearly, agriculture is an important and large component of the state's economy. It is also and necessarily water-intensive. I have no quarrel with any of that, or over the principle that agriculture is a full partner in negotiating how to mete out an increasingly scarce resource in a growing state and nationally, a changing, influential environmental public consciousness.

What I have a problem with is overheated rhetoric about national (food) security and the attempt to organize a misleading, media-friendly minority group in a power play by elements within the big ag strategy. Simple as that.

Don't like overheated rhetoric on any side. My blog makes that pretty clear. Not a big fan of Restore the Delta, Dan Bacher, CSPA, and their nimby preservationist argument either. Hell, I even support in principle the peripheral canal, provided it can be proven to help stabilize the Delta's ecosystem's problems.